Blog
Lessons from the Tesco Growth Story courtesy of Sir Terry Leahy
4th July 2011
It was a delight to welcome Sir Terry Leahy, CEO of Tesco plc for the last 14 years, to the Business Teacher National Conference 2011. Sir Terry generously gave over an hour of his time to present his perspectives on Tesco’s growth strategy and to field a range of terrific questions from a packed audience at the Sir Henry Wellcome Auditorium.
The link to Sir Terry’s presentation is provided at the foot of this blog entry.
Sir Terry’s delivery was hugely impressive. A key lesson which many of us noted down was the need for businesses to “find the truth” - to accept where a business has fundamental weaknesses and work hard to eradicate them. Tesco did this by focusing solely on customer needs and wants. They undertook a systematic research programme to identify what the minute details of what customers wanted from supermarket shopping and then changed every aspect of their business to meet that understanding.
Sir Terry was clear that the most powerful voice in any organisation is the customer - and not the shareholder. Every part of the growth strategy was about getting close to customers, understanding how their needs were changing over time, and then responding first. So Tesco was first with a loyalty card (Clubcard); first with a pledge to reduce checkout queues; first with online shopping; first with value ranges and lines.
The introduction of the Tesco Value range was interesting in that Sir Terry explained that Tesco’s shareholders were very concerned about it (they worried that it might damage profitability and reposition Tesco into the discounted sector of the grocery market). But Tesco’s research suggested that value for money was what its customers needed at that time - so they backed their understanding and ignored shareholder concerns.
Sir Terry touched on many relevant aspects of the business curriculum in his talk. I was particularly taken by his comment that long-term business success is about a firm sticking to its clear vision and values. The values and culture of a firm are determined by the people who work for the business. 500,000 people work for Tesco currently and they were the people who determined Tesco’s vision statement - which was created after asking them all two questions
(1) What does Tesco stand for in the eyes of customers?
(2) What kind of business do the employees want Tesco to be?
I was particularly taken by a response to one of several terrific questions, Sir Terry explained that the organisational structure at Tesco only has six levels. Staff participate in a training and development scheme which enables them to progress all the way from the foot of the structure to the top. Tesco invests a significant amount in internal training to support this progression. Could Tesco find itself diversifying into the provision of education? Perhaps we’ll soon see “Tesco University” asked the delegate? In a sense Tesco already is already there, with a management development programme which would probably be the envy of any business school.
So much to take from Sir Terry’s talk. I’ll finish on one point that raised the spirit after a difficult year for Business Education.
Sir Terry was clear - it is essential that school students (supported by their teachers) be encouraged to pursue a career in business, particularly as entrepreneurs. Social success requires economic success, which can only be achieved by UK businesses investing and growing. Whilst the Coalition seems to have abandoned enterprise in the curriculum, now more than ever, schools and businesses need to get a close as possible.